R. C. Dare is considering an investment in Deval Leasehold Improvements Ltd., a growing company that has been in business for five years. The good growth is the result of a reputation built on high-quality workmanship, the use of first-class materials, and fair prices.
However, Deval has experienced cash flow difficulties, and some of Deval's suppliers have expressed concern with the slow payment on their accounts. This can be attributed in part to the increasing number of government jobs awarded Deval. Although the government jobs are steady work, payment is slower than from private work. Examine the financial statements of Deval Leasehold for the past three years and decide if you would recommend an equity investment of approximately $15,000 by R. C. Dare. Prepare the 13 ratios of Chapter 3 as well as the asset utilization variations to support your recommendation. Also comment on the firm's leverage.

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DEVAL LEASEHOLD IMPROVEMENTS LTD. Income Statement 2013 2014 2015 $245,109 $195,200 $142,481 Sales ... Cost of goods sold Gross profit..... 168,145 130,198 83,351 59,130 76,964 65,002 Other expenses. . 71,672 60,133 54,416 5,292 Operating profit.. 4,869 4,714 Interest expense 800 950 1,100 Earnings before taxes 4,492 3,919 3,614 .3. 809 705 650 Taxes.... Earnings available to common shareholders.. Dividends declared. .... 3,683 3,214 2,964 612 612 612 Balance Sheet Assets 2013 2014 2015 Cash ... 215 $ 1,178 $ 1,775 Accounts receivable. 43,770 32,534 21,920 Inventory.... 10,204 7,808 5,699 Prepaid expenses.... 770 191 309 Capital assets... 10,492 8,124 6,200 Total assets. . $65,451 $49,835 $35,903 Liabilities and Shareholders' Equity Accounts payable . $31,351 $19,766 $10,658 Customer deposits.. 9,420 7,961 4,238 Term loan .... 7,500 8,000 9,500 Common stock 6,120 6,120 6,120 Retained earnings.. Total liabilities and shareholders' equity.... 7,988 $65,451 $49,835 $35,903 11,060 5,387